The impact of internationalization degree on cash levels: Evidence from Latin America

Although cash management has been extensively studied, the cash policies of multinational corporations (MNCs) outside of the U.S. market have been underexplored. We fill this gap in the literature by comparing the cash policies of MNCs to those of non-MNCs in a Latin American setting (Argentina, Brazil, Chile, Colombia, Mexico and Peru). Using different proxies for multinationality, we find evidence that the cash holdings of multilatinas are significantly higher than those of their domestic counterparts. Overall, given that foreign markets may offer the best investment opportunities for many MNCs, our results are consistent with the argument that multilatinas maintain higher cash levels to take advantage of the greater growth opportunities abroad. We contribute to the literature on cash management and international business by expanding knowledge regarding the efforts of MNCs in emerging markets. Our results hold following a series of robustness checks and endogeneity concerns.     

Liquid asset sheltering,or cost of capital? The effect of political corruption on corporate cash holdings

I posit that political corruption affects firms through an entrenchment between entrepreneurs and politicians instead of coercive extortion. Based on this postulate, I refute the claim that firms in a more corrupt environment hold less cash due to liquid assets sheltering from political extraction. Instead, I propose that firms in a more corrupt environment hold less cash because of the high cost of capital. In fact, I find that firms in more corrupt countries hold cash beyond their optimum for the given cost of carry due to severe financial constraints. This excess cash results in value destruction. I call this phenomenon the financial effect of corruption. Thus, I challenge the conventional wisdom and argue that the effects of political corruption on corporate cash holdings are primarily indirect through financial mechanisms.     

International takeover laws and corporate cash holdings

We examine the impact on corporate cash holdings of international merger and acquisition (M&A) laws, which facilitate corporate takeovers. We use the staggered enactment of M&A laws from 1992 to 2005 and a sample spanning 34 jurisdictions, and find that levels of corporate cash holdings increase after passage of M&A laws. We also find that firms with better operating performance, higher earnings volatility, higher P/E ratio, and in jurisdictions with high M&A intensity hoard more cash after the enactment of M&A laws. These firms decrease dividends and capital expenditure and increase cash-based acquisitions in the post-M&A law period. Additional analysis shows that the effect is manifested in the subsample of firms in jurisdictions with better institutional environments. Lastly, we find that investor valuations of cash holdings decrease after the enactment of M&A laws. Collectively, our results suggest that managers hoard cash to finance M&A activities after the enactment of M&A laws, driven by the motive of empire-building, and that cash hoarding behaviors are viewed by investors as value-decreasing.     

Work-from-home and the risk of securities misconduct

In the wake of the global pandemic, a challenge for CEOs and boards is to set a stakeholder-acceptable organizational balance between remote and traditional office working. However, the risks of work-from-home are not yet fully understood. We describe competing theories that predict the effect on misconduct of a corporate shift to work-from-home. Using internal bank data on securities traders we exploit lockdown variation induced by emergency regulation of the Covid-19 pandemic. Our difference-in-differences analysis reveals that working from home lowers the likelihood of securities misconduct; ultimately those working from home exhibit fewer misconduct alerts. The economic significance of these changes is large. Our study makes an important step toward understanding the link between the balance of work locations and the risk that comes with this tradeoff.     

Cash holdings and real asset liquidity

This paper examines the relationship between the ability of a firm to sell its real assets and its cash holdings behavior. A substitution effect exists between the size of cash balances and the liquidity of a firm’s real assets when access to external capital markets is limited. Among financially constrained firms, higher asset liquidity is related to lower cash holdings. Additionally for financially constrained firms, the market value of cash is lower for firms with higher asset liquidity.     

Securities class actions and conditional conservatism: Evidence from two legal events

We use two US court rulings as exogenous shocks to firms' litigation environment and examine the changes in conservative financial reporting following these court decisions. The Silicon Graphics ruling in 1999 imposed a heightened pleading standard and discouraged the filing of shareholder lawsuits against firms with headquarters in the Ninth Circuit. The Tellabs ruling in 2007, however, effectively reversed the Silicon Graphics ruling and made it easier to file securities litigation against Ninth Circuit firms. We predict and find that the reduced litigation risk following the Silicon Graphics ruling discourages conservative reporting for Ninth Circuit firms. By contrast, the elevated threat of shareholder lawsuits following the Tellabs ruling encourages conservative reporting for Ninth Circuit firms relative to non-Ninth Circuit firms. The disciplining effect of the threat of shareholder lawsuits on conservatism is stronger for firms facing higher ex ante litigation risk. The litigation-risk-induced increase (decrease) in reporting conservatism leads to higher (lower) firm valuations.     

数字经济对企业现金持有水平影响研究 ——基于"宽带中国战略"的准自然实验

全面推进以“宽带中国战略”为主的数字化经济建设是带动企业数字化转型，优化企业资源配置，进而促进企业长期稳定发展的重要步骤。以“宽带中国战略”为准自然实验，基于2008-2020年中国上市公司数据，采用DID（双重差分）模型考察数字经济对企业现金持有水平的影响。研究表明：数字经济显著抑制企业现金持有水平，有效促进经济流通；中介效应模型检验发现，积累人力资本和缓解融资约束是数字经济降低企业现金持有水平的重要机制；异质性检验发现，数字经济对东部地区企业和中小企业现金持有水平的抑制作用更显著。基于以上研究，充分识别了当前我国数字经济对于企业现金持有水平的抑制作用，同时有助于推进“宽带中国战略”的进一步落地实施。     

非国有股东超额委派董事与企业现金持有

基于持股权与控制权非对等配置逻辑，文章以2009—2019年A股国有上市企业为研究主体，实证检验非国有股东超额委派董事对企业现金持有水平的影响。研究发现，非国有股东超额委派董事显著提高参股国企的现金持有水平，且随着超额委派比例增加更加显著；进一步地，该正向作用在中央层级企业及市场化进程较高地区表现更为显著；明晰其作用机理，发现其通过抑制超额持现所致的过度投资行为、迫使无效耗散的现金尽快回流进而提高持现水平；此外，非国有股东超额委派董事和超额委派比例均有助于优化现金二次配置，促使企业将超额现金用于发放现金股利及进行创新投入，并最终提升现金持有价值和企业价值。文章结论不仅印证和延伸混改推进过程中非国有资本在高层治理维度所发挥的积极作用，更为进一步深化混合所有制改革及完善中小股东保护体系提供借鉴。     

Are all types of real transaction management equal in the eyes of bank lenders?

This study examines whether bank lenders react differently to various types of real transaction management (RTM) by borrowing firms. Drawing upon the differential cash and cash flow effects of alternative forms of RTM, we predict and find that banks provide more favorable loan terms, that is, lower interest spread and reduced likelihood of required collateral, for firms reporting more discretionary reductions in research and development (R&D) expenditures. In contrast, lending banks respond unfavorably to borrowers’ engagement in RTM through aggressive sales discounts and overproduction of inventories. Additional analysis reveals that the favorable effect of discretionary R&D reductions on loan pricing is greater (smaller) for borrowing firms with a prior relationship with the bank or with a lower level of cash holdings (loans with longer maturity). Overall, our findings suggest that banks, with their unique payoff functions and monitoring incentives, do not view all forms of RTM negatively.     

Proxy contests and debt contracting behavior: The interplay of managerial,shareholder and creditor incentives

We evaluate how heterogeneity in the strategic interplay among shareholder, creditor and manager incentives influences debt contracting behavior around proxy contests. We find that, after proxy contests, new loan originations have significantly higher spreads and more stringent non-pricing contracting terms. The effect, however, occurs largely in contest firms where Chief Executive Officers (CEOs) are provided with risk-taking incentives. Further, creditors’ simultaneous equity holdings and credit default swaps (CDS) trading attenuate the impact of proxy contests on debt contracting costs. Finally, proxy contests that culminate in voting and dissident victory experience the largest increase in loan pricing. Overall, our results suggest an increase in the agency cost of debt occurs after proxy contests, particularly when managerial risk-taking incentives are high, and when creditors do not simultaneously hold target firms’ equity or CDS.